Credit Suisse Upgrades Enbridge Partners Following Strong Quarter

Enbridge Energy Partners, L.P. (NYSE: EEP) reported solid results ahead of expectations. Credit Suisse’s John Edwards upgraded the rating on the company from Neutral to Outperform, while raising the price target from $25 to $27.

2Q16 Results

Enbridge Energy Partners reported its adjusted EBITDA at $489mm, ahead of the CS estimate of $447mm and the Street's $451mm. The beat was driven by better-than-expected liquids performance, analyst John Edwards noted.

Liquids posted adjusted segment margin of $331mm, ahead of the $293mm estimate, while Natural Gas reported -$4mm, versus the $16mm estimate. Interest expense same in at $12mm, lower than the CS estimate of $106mm, while maintenance capex, at $11mm, was also lower than the $23mm estimate.

The liquids segment posted a beat mainly due to higher margins though Mid-Con and North Dakota volumes beat. Enbridge Energy Partners was able to beat expectations despite the $20mm negative impact from the Wildfires in Alberta during 2Q, Edwards added.

Line 6B Incident

The company has agreed to a civil settlement with the US DOJ and EPA regarding the Line 6A and 6B incidents in 2010. “We believe investors and management are happy to put this incident behind them and the terms of the settlement are not unreasonable. In terms of Line 3 replacement, early 2019 is still targeted for in-service and EEP has reduced near-term capital requirements,” the analyst wrote.

Estimates Revised Upward

The EPS estimates for FY17, FY18 and FY19 have been raised from -$0.99 to $0.49, from -$1.14 to $0.86 and from -$1.06 to $0.74, respectively.

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